Journalist: Olivia Kinghorst | Photographer: Markus Bertschi/gategroup | Magazine: Bigger, better, stronger – December 2023
The global airline catering company gategroup provides food to 3.3 million flights and more than 500 million airline passengers every year. When Christoph Schmitz took over as CEO in 2021, the Zurich-based firm found itself fighting to recover from the pandemic. But with every crisis, comes an opportunity. Schmitz’s next aim was to transform gategroup into a market leader for food both in the sky and on the ground.
Your journey with gategroup began in 2015 when you joined as CFO. What were your first impressions?
I joined gategroup right in the middle of a reshuffle of the whole management team. gategroup’s business had been very stagnant in terms of top-line development and there was also significant margin erosion. All of this led to a very depressed share price. Our business has always been in airline catering, but we had lost focus on our purpose along the way while trying to grow and seek out adjacent opportunities.
It was clear that gategroup was struggling with its purpose – to provide passengers with superior culinary and retail experiences.
How did you steer the company back on the right path?
It was essential to be financially successful in our core business. We work closely with our customers, who are airline carriers such as Lufthansa, Air France, United and Delta Air Lines, to provide food on board as well as in airport lounges. As a result, we launched a new five-year strategy called Gateway 2020. Our aim was to tackle four key areas: airline catering, commercial innovation, geographic expansion and standardisation of our operations. This clear vision paid off and we managed to increase our sales from CHF 3 billion in 2015 to almost CHF 5 billion in 2019.
“At the end of the day, it comes down to financial resilience”
gategroup is currently the world’s largest provider for airline catering, with a presence in over 60 countries and 200 airports. What does it take to be an industry leader?
The motto of this magazine is ‘Bigger, better, stronger’, and at the end of the day it comes down to financial resilience. My opinion is that if you are financially superior, you can grow. At the moment, there is a lot of consolidation going on in the aviation industry. In this wave of consolidation, you can only be successful if you are financially strong enough to be the consolidator – and not be the one being consolidated. This requires several things: good operational performance, profitable contracts and a good cash generation profile.
Being an industry leader with a global footprint also comes with advantages.
Our sheer size makes us more resilient to external and internal shocks. In the past, we have faced many crises, such as the SARS outbreak in 2003 or the 9/11 terrorist attacks. Since these crises mainly impacted certain regions, we were able to absorb these shocks more easily because we have a presence across six continents.
“There is light at the end of the tunnel”
Nevertheless, the Corona pandemic brought the travel industry to a standstill in 2020. How did gategroup respond to the crisis?
We were very optimistic heading into 2020. We had surpassed CHF 5 billion in revenue and expanded our business with the acquisitions of the Air France catering business Servair and the airline catering provider LSG Europe from Lufthansa. When the crisis hit, we were one of the most heavily impacted companies in Switzerland. We lost around 90% of our revenue and we were burning through more than CHF 100 million a month. To overcome the crisis, we reduced our workforce from 50,000 to 25,000 people and launched a costreduction programme. It was a fight for survival.
“You can’t be an effective leader if every crisis throws you off.”
The appetite for travel has returned, with global air traffic nearly reaching prepandemic levels. Has gategroup completely recovered from the pandemic?
Our top line has recovered to 90% of pre-crisis levels. On the bottom line, however, we have so far only recovered about 50% compared to 2019. This can be attributed to three reasons: shortages in the labour market and lower productivity, supply chain disruptions and high inflation.
We had to rebuild our workforce and it was a struggle to find talent. Rehiring on this scale means you don’t get the same people back – a third of the workers that left during the crisis went into early retirement and another third moved to different industries. This led to productivity issues because we have had to retrain workers.
Secondly, we faced a food shortage in various markets due to supply chain issues. This led us to replace food items at a significantly higher cost, as we had to source them from alternative markets. In addition, high inflation also forced us to pay premiums of up to 40% for chicken and salmon, for example. The big challenge for us now as an organisation is to catch up to pre-pandemic levels, which we expect
to achieve in the near future. Overall, I remain optimistic.
What drives this optimism? How can you scale and expand your business in the future?
Before the pandemic we had all our eggs in one basket: aviation. However, the Corona pandemic proved that no industry is safe. That’s when we had a lightbulb moment and decided to look for new growth opportunities.
For example, we started to make lunch boxes for COVID-19 vaccination stations for people who were in quarantine. We also began producing ready meals for super-markets and food delivery companies.
They were struggling with the demand from everyone staying at home and ordering food. This made us realise we could leverage our core infrastructure – food, kitchens, logistics – and cater to an external market beyond the aviation industry.
“The quality of the corporate culture is independent of whether a company is growing or stagnating.”
What does this mean for your strategy going forward?
Our strategy now is to recover our aviation catering business to its former glory as quickly as possible. At the same time, we are searching for new opportunities in the wider food solutions segment. We already have the expertise in food, so why limit ourselves to the skies? One example is creating ready-made food for supermarkets, because the margins there are at least as attractive as in airline catering. Another is producing pulp and paper-based packaging for large food chains such as McDonald’s.
Our food solutions business is already expected to generate close to CHF 900 million in revenue this year. Our ambition in the long term is to have a food solutions business that is as large as our airline catering business. In order to succeed in this, we will need to continuously work on our unique selling proposition (USP). For gategroup, this USP is the quality of the food that we produce. Without this uniqueness, we become replaceable.
Do you expect sustainable growth in the aviation industry in the next decade?
We can expect sustainable and steady growth of four to six percent a year in this industry over the next twenty years.
Even though the Corona pandemic was a major hurdle, there is light at the end of the tunnel. The demand for flying is increasing. The world population is growing, the middle class is expanding, and people have more disposable income to spend on travelling. Therefore, it is essential for us as a company to grow in line with market growth. Our investors are looking for resilient companies such as ours which can deliver long-term value rather than short-term profits.
How have you grown as a person since taking on the role as CEO of gategroup?
When I transitioned from CFO to CEO in 2021, I had to prove that I was the right person to lead the business out of the crisis. I was able to achieve this by developing a clear plan and focusing on structured execution of the defined initiatives. Since becoming CEO I have also realised the importance of resilience in the aviation business, especially during unexpected events. You can’t be an effective leader if every crisis throws you off. I am optimistic by nature and believe there is a tendency for problems to work themselves out. At the end of the day, I have also learned to manage my energy. This means dedicating energy to the main priorities, and also surrounding myself with a positive team who I can draw energy from.
What milestones do you hope to achieve in your role in a decade from now?
I also ask myself this question when I get out of bed: what’s the legacy I want to leave behind? In essence, I would love to see a company that is recognised as a top provider of high-quality and sustainable food solutions, both in the aviation industry and the wider food industry. In addition to this, I hope to rebuild our financial strength to pre-pandemic levels and create substantial value for our shareholders. Our aim is to take the company public again in the medium to long term. Last but not least, I want to create a workplace where people are happy and proud to be a part of.
gategroup is a global industry leader in airline catering, retail and hospitality services. Since it was founded from Swissair Catering in 1992, the company has grown into a market leader with a presence in more than 60 countries. The company was delisted from the Swiss Stock Exchange in 2017 and is co-owned by the investment firms RRJ Capital and Temasek. gategroup is currently headquartered in Zurich and employs over 38,000 people.
www.gategroup.com
Christoph Schmitz (58) joined gategroup in 2015 as Chief Financial Officer. In 2021, he was appointed Chief Executive Officer. Prior to this, he was CFO of ingredients supplier Wild Flavors and held C-level roles in multinational companies in North America, Australia, Germany and India. He earned an Master of Business Administration (MBA) from the Rotman School of Management at the University of Toronto. Schmitz was born in Germany and also holds Swiss citizenship. He is married and one of his hobbies is sailing.
